Kathy is a senior business trial attorney with more than 25 years experience prosecuting and defending claims for clients involved in Ponzi scheme matters and in bankruptcy proceedings. Kathy’s practice includes recovering assets for clients in complex fraud cases under standard fee and alternative fee arrangements. Kathy also serves as a mediator in bankruptcy matters, in complex business disputes, and in matters requiring an expert on fraud or Ponzi schemes.

Monday, December 31, 2018

Below is a summary of the activity reported for December 2018. The reported stories reflect at least 9 new Ponzi schemes worldwide; about 144 years of newly imposed sentences for people involved in Ponzi schemes; 3 guilty pleas or convictions, and an average age of approximately 51 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed.

Gershon Barkany, 34, was sentenced to 56 months in prison in connection with a $62 million Ponzi scheme that defrauded more than 10 victims. Barkany had pleaded guilty to wire fraud in 2013 in connection with the scheme that persuaded more than 10 people to invest in supposed “risk-free” deals to buy and resell real estate in New York and New Jersey. He fooled investors by creating false documents, including purchase agreements and escrow agreements.

Annette Bongiorno, 70, the former secretory for Bernard Madoff, is seeking an early release from prison. Bongiorno has served two-thirds of her 6-year prison sentence and is asserting that she should be released to home confinement. Bongiorno maintained that she was unaware of Madoff’s Ponzi scheme.

Vincent P. Falci, 59, of New Jersey, was convicted on charges in connection with a $10 million Ponzi scheme. The scheme stole money from the savings of policemen, firemen, and retirement funds for first responders. More than 200 victims were defrauded when Falci told them that their money was conservatively managed and would generate high returns with little risk. Falci controlled investment funds under the names Saber Funds and Vicor Tax Receivables LLP.

Jordan E. Goodman of New York was charged with securities fraud by the SEC in connection with his activities in soliciting investments into the real estate Ponzi scheme known as Woodbridge Group of Companies. The scheme, run by Robert Shapiro, brought in $1.2 billion, and Goodman’s 1,200 clients invested about $147 million of that amount. Goodman helped a company known as Knowles Systems, Inc., owned by Lynette M. Robbins, raise the funds. Robbins was charged by the SEC in connection with the scheme in August. Goodman did not disclose to his clients that he was receiving kickbacks for their investments. He received about $2.3 million in kickbacks. Goodman holds himself out as “America’s Money Answers Man,” and he advertised the Woodbridge investment in media appearances, calling the investments “safe” and “secure.” Alan H. New and David S. Knuth, co-owners of Synergy Investment Services, were also charged. The following additional 10 individuals were also charged: Robert S. "Lute" Davis, Donald Anthony Mackenzie, Aaron R. Andrew, Jeffrey L. Wendel, Randy T. Rondberg, Richard Fritts, Marcus Bradford Bray, Gregory W. Anderson, Claude Steven Mosley, and Gregory A. Koch.

Michelle Labra, 47, of Illinois was charged in connection with an alleged real estate Ponzi scheme that took more than $23 million from more than 25 investors. Labra is a suburban real estate broker who owned and operated Labra Group Realtors. She promised investors returns of more than 14% on short-term, high-interest mortgages to borrowers. However, prosecutors allege that Labra never actually underwrote any loans and told investors that the reason investors were not getting their money and returns was because the IRS had seized the funds.

Thomas Lanzana, 51, formerly of New Jersey and now of South Carolina, was accused of running a Ponzi scheme that defrauded at least 20 people out of about $900,000. Lanzana falsely claimed that he was a successful forex trader, delivered false account statements to his customers showing falsified balances, and sent false tax documents to customers reporting earnings that did not exist. Last year, the CFTC filed a civil enforcement action against Lanzana and Blackbox Pulse, LLC.

Juan Miguel Lopez, 54, of Texas, was sentenced to 79 years in prison for operating a Ponzi scheme that defrauded investors out of $4.9 million. Lopez fraudulently promised investors returns from the supposed financing of small business loans. He targeted Hispanics who were not otherwise able to obtain loans.

Hector May, 77, and his daughter, Vania May Bell, both of New York, were charged by the SEC with running a $7.9 million Ponzi scheme through Executive Compensation Planners Inc. They were accused of lying to investors by telling them their money was invested in bonds when in reality the money was spent to pay for personal and business expenses as well as luxury items such as jewelry, furs, vacations and a limousine driver. Criminal charges were also brought against May, who has pleaded guilty to the charges.

Steve Pagartanis, 59, of New York pleaded guilty to charges relating to a Ponzi scheme that spanned 18 years and scammed 17 victims. Over $13 million was invested in the scheme and there were actual losses of more than $9 million. Pagartanis solicited elderly victims to invest in real estate-related investments that were supposedly secure and earned fixed returns between 4.5% to 8%. Investors were told that their money was being invested in a publicly traded Canadian company called Genesis Land Development. Instead, he used the money to pay for his personal expenses and on luxury items such a jewelry, airline tickets, massages and cigars.

Priceville Partners LLC, a used car and title loan company, was labeled a Ponzi scheme by its bankruptcy trustee, calling it “really no different than a little Bernie Madoff.” Greg Steenson, 49, was the managing partner of Priceville Partners and is currently in jail awaiting trial on charges including theft, forgery, securities violations, and financial exploitation of the elderly.

Ernest Romer III, 57, of Michigan was sentenced to 7 to 20 years in prison for spending $3 million of his clients’ money. Romer worked for CoreCap Investments LLC and targeted senior citizens by convincing them to invest their funds with him. Instead, he used their money for high-risk investments and for personal expenses.

Denise Gunderson Rust and Joshua Daniel Rust were included in the CFTC complaint against Gaylen Dean Rust and Rust Rare Coin, Inc. in which the CFTC alleges that the defendants were running a precious metals Ponzi scheme. Denise and Joshua are accused of knowing that Silver Pool, a commodities pool, was a fraudulent scheme and that they signed checks issued to Silver Pool investors knowing that they were Ponzi payments. The amended complaint also alleges that the pool involves 430 individuals and at least $200 million, up from the 200 individuals and $170 million that was originally alleged.

Brian Thomas Sapp, 38, pleaded guilty to charges relating to his $1.4 million real estate Ponzi scheme that defrauded 20 investors. Sapp claims he was buying distressed properties in Virginia, Maryland and Washington D.C. and would sell them generating returns as high as 25%. Sapp used DocuSign to forge digital signatures on fraudulent contracts to prove to investors that he was supposedly selling houses and generating the returns he had promised.

John Gregory Schmidt, 67, was arrested on charges in connection with an alleged scheme run through Schmidt Investment Strategies Group. Schmidt created false financial statements and sold securities without the knowledge or approval of his investors. Prosecutors have alleged that, “For years, this defendant defrauded a number of investors, many of them elderly or with dementia. He had to keep stealing from more investors in order to cover for the thefts from other investors,” The SEC has also filed charges.

Gary Todd Smith, 49, was sentenced to 40 years in prison and ordered to pay $63.4 million in restitution in connection with a scheme run with his father, Gary Truman Smith, through Smith Advertising, a North Carolina agency that represented local tourism agencies. The Smiths borrowed money from more than 150 investors and the agency was worth negative $169.8 million when it collapsed in 2012.

Jeremy Spence was sued along with others in connection with an alleged Ponzi scheme run through Coin Signals. Spence allegedly held himself out as a successful crypto trader, offering “lucrative returns” supposedly generated through a series of crypto hedge funds including Alts Fund, Long Terms Fund, Evermarkets ICO, and Coin Signals Mex (CSM) Fund. The complaint alleges that the CSM Fund held as much as 1,300 Bitcoin valued at more than $10 million.

Christopher B. Warren, 50, of Florida, was charged in Tennessee with running a solar farm Ponzi scheme in Nashville. Warren founded Clean Energy Advisors, claiming to own solar farms in North Carolina which would be sold to Duke Power. Warren defrauded 60 investors and promised them returns from the supposed sale revenues. Warren pleaded guilty and admitted there was never going to be a sale and that he still owes investors at least $15 million.

INTERNATIONAL PONZI SCHEME NEWS

Australia

Aimee Ploi Pitman, 27, and her partner, Colin Voeuk, 32, were sentenced to seven years in jail in connection with an ATM Ponzi scheme that defrauded up to 17 investors out of $1.7 million. The pair pleaded guilty to benefit by deception. Pitman was a lifestyle blogger who was the face of the scheme.

Chris Marco, 60, has been accused of running a $240 million Ponzi scheme that defrauded 130 investors. The scheme, run through Coastline Group, allegedly promised investors large profits from complex financial deals in Europe.

Cambodia

Huot Sovann is the subject of extradition proceedings in connection with a $400 million Ponzi scheme that defrauded tens of thousands of Cambodians. The scheme was run through Empire Big Capital, Asian Investment Fun, and Investment Consultant Association. The scheme promised returns of 10% on minimum investments of $2,000.

China

Six people were arrested in connection with an alleged $173 million scheme run through financeofchina.com that claimed to be a peer-to-peer lending platform. The scheme allegedly promised annual returns of 14% but did not have a financial license.

England

Mark Starling, 57, was arrested in connection with an alleged £3 million Ponzi scheme. Starling claims to be running three funds – the Pilot Dax Fund, the Shadow Dax Fund, and the Pilot Eurostoxx Fund. He was a self-described “proprietary futures trader” and promised investors returns of 12% to 18% per year.

India

Methuku Ravinder, the chief executive officer of Sun Pariwar Group of companies, was arrested and assets of Rs 14 crore were frozen. Ravinder had been a government school teacher but, unhappy with his salary, he started as many as 8 businesses, such as Sun Mutually Aided Thrift and Credit Cooperative Society Ltd, Methuku Chit Funds, and Methuku Ventures, all operating under the umbrella of Sun Pariwar.

Police arrested 10 individuals in connection with an alleged Bitcoin-related Ponzi scheme called GB21. The scheme defrauded 8,000 investors and promised them 10% or more in monthly returns. Amit Bharadwaj and his brother Vivek had been arrested in connection with Gain Bitcoin earlier in the year. Akash Sancheti and Sahil Omprakash Bagla were also arrested in connection with the scheme.

Babita Ravat, 36, was accused of running a Ponzi scheme through her company, Jeevan Seva Company Pvt. Ltd. Ravat had 20,000 agents luring in investors into the scheme. Co-owners of the company, Ravi Kadam and Sandeep Behravat, were arrested as was Mustaq Shaikh, who used to work at the company. Harish Labana and Indrajeet Prajapati are still on the run.

New Zealand

Kelvin Clive Wood, 69, pleaded not guilty to charges that he was running a $7 million Ponzi scheme as a foreign trader. The more than $7 million was taken from 18 investors.

Lance Jack Ryan aka Lance Thompson, who was sentenced last year to 7 ½ years in prison for his role in the BlackfortFZ Ponzi scheme that defrauded 900 people, had his sentenced reduced. The scheme had lured in approximately $8.3 million, and about $4.1 million of that was lost as no foreign exchange trading actually occurred. Jimmie McNicholl was convicted and also sentenced to 11 months home detention in connection with the scheme. Ryan had pleaded guilty and appealed his sentence as being too high relative to comparable sentences. Ryan was resentenced to 6 years imprisonment.

NEWSWORTHY LEGAL ISSUES IN PENDING PONZI SCHEME CASES

The receiver appointed to administer the Arthur Lamar Adams and Madison Timber Properties LLC $100 million Ponzi scheme case filed a complaint against the law firms Butler Snow and Baker Donelson LLC and two employees of the firms. The receiver alleges that the firms and individuals acted recklessly in advising investors. Both firms and the individuals have denied any involvement or wrongdoing in the matters alleged. Separately, the University of Mississippi agreed to return about $310,000 that was donated to the University by Adams.

The Ninth Circuit upheld a lower court ruling that an investor who referred other investors into the Nationwide Automated Systems Inc. Ponzi scheme was forced to return about $750,000 in referral fees. The court found that the referral fees did not constitute “reasonably equivalent value. Hoffman v. Markowitz, 2018 U.S. App. LEXIS 36243 (9th Cir. Dec. 24, 2018).

Friday, November 30, 2018

Below is a summary of the activity reported for November 2018. The reported stories reflect at least 12 new Ponzi schemes worldwide; about 60 years of newly imposed sentences for people involved in Ponzi schemes; 4 guilty pleas or convictions, and an average age of approximately 50 for the alleged Ponzi schemers. Please feel free to post comments about these or other Ponzi schemes that I may have missed.

Gary L. Cain, 61, was arrested in Texas just two days before he was to begin serving his prison sentence in connection with a Ponzi scheme run with former state Sen. Carlos Uresti, 54. A jury previously found Uresti and Cain guilty in connection with the fracking enterprise run through FourWinds Logistics. FourWinds CEO Stanley P. Bates pleaded guilty earlier this year.

Craig Carton, 49, was convicted for his role in a ticket-selling Ponzi scheme. Prosecutors had alleged that Carton had misappropriated at least $5.6 million. Michael Wright, 42, pleaded guilty to charges related to the scheme in September. They were accused of soliciting investors to fund a business of buying and reselling blocks of tickets to music, entertainment and sporting events. Joseph Meli is currently serving 6½ years in prison for the scheme. Meli’s wife, Jessica Ingber Meli, was ordered to pay $4 million in connection with the SEC action in which she was named as a relief defendant.

Stephen Tudor Crozier, 66, of California, pleaded guilty to charges relating to a scheme that defrauded investors out of more than $1 million. Crozier held himself out as a financial advisor with knowledge of the European financial markets.

Michael D’Alessio, 53, pleaded guilty to charges related to an alleged Ponzi scheme run through Michael Paul Enterprises in New York. The scheme involved luxury real estate developments that defrauded investors out of approximately $58 million.

Rabbi Zvi Feiner of Chicago was accused of defrauding investors in his local Jewish community out of more than $35 million. Feiner is the head of Feiner Investment Corporation, which was running an alleged nursing home investment scheme.

Edwin Fujinaga,72, was convicted in connection with his role in the $1.5 billion Ponzi scheme run through MRI International Inc. The scheme defrauded more than 10,000 Japanese investors by promising them that their money would be used to purchase medical claims. Fujinaga used less than 2% of the investor funds for that purpose and instead used the money to pay earlier investors and to buy a private jet, a mansion, real estate in Hawaii and Beverly Hills, and luxury cars.

Sebastian Greenwood was arrested and extradited to the U.S. in connection with the OneCoin scheme. Greenwood was arrested in Thailand and is accused of being involved in a $400 million money laundering scheme through OneCoin. Greenwood is believed to have been second in command at OneCoin behind Ruja Ignatova.Khemraj Dave Hardat, 50, was charged for allegedly defrauding investors out of $5 million in a Ponzi scheme. Hardat is a Canadian national who has been living in Los Angeles on an expired tourist visa. Hardat allegedly defrauded at least 7 investors by falsely claiming that NBA stars such as Stephen Curry and Shaquille O’Neal were endorsing his products. He misrepresented that he had a postgraduate doctoral degree from Yale and used falsified bank statements to lure in investors. Hardat used the funds for payments on his Maserati and Lamborghini, among other things.

Nathan Pyles, of Idaho, was accused by the Idaho Finance Department of defrauding victims out of at least $4.9 million through his company, Shiloh Management Services. The complaint also accused an investor, Roger Button, of recruiting new investors for commissions without being a registered agent. Investors were promised between 10% and 30% from the real estate scheme that involved fixing and flipping old houses and building houses on undeveloped property. Pyles raised at least $28.8 million from at least 55 investors.

Gaylen Dean Rust and Rust Rare Coin, Inc. of Utah were charged by the CFTC with running an alleged $170 million Ponzi scheme. The scheme allegedly defrauded at least 200 people in a commodities pool called Silver Pool. Investors were told they were buying into a share of a pool that purchased precious metals and were promised annual returns of 20% to 25%. The CFTC lawsuit also names Denise Gunderson Rust, Joshua Daniel Rust, Aleesha Rust Franklin, R. Legacy Racing Inc., R Legacy Entertainment LLC, and R Legacy Investments LLC as relief defendants.

Robert Shapiro, the former Chief Executive Officer of Woodbridge Group of Companies, agreed to pay $120 million to the SEC to settle allegations that he ran a $1.2 billion real estate Ponzi scheme. Shapiro did not admit or deny the allegations. The scheme targeted 8,400 investors and promised returns as high as 10% from investments in developers who flipped luxury real estate. Meanwhile, another broker, Dennis Ferwerda, was barred from FINRA for his involvement in selling investments in the Woodbridge Ponzi scheme.

Brandon Walton Stewart, 33, of California was sentenced to 35 years in prison in connection with $13.5 million Ponzi scheme. Stewart promised investors that he would use their money to buy stocks in companies such as Facebook.

Bobby Duane Vise, 53, of Texas, was sentenced to 13 years in prison and ordered to pay $1.27 million to 12 victims in connection with a Ponzi scheme that defrauded investors out of more than $1.2 million. Vise pleaded guilty to running a real estate investment scheme.

Roland Von Kurnatowski, 67, of New Orleans was accused of running a Ponzi scheme. A lawsuit filed against Von Kurnatowski alleges that he persuaded investors to invest in Bond Fund One, or BF-1, which would trade U.S. Treasury bills. The scheme defrauded investors out of hundreds of thousands of dollars.

April Vuong, 42, and Hao Quach, 41, were each sentenced to six years in prison in connection with a Ponzi scheme and will be sentenced to an additional 5 years in prison if they fail to pay restitution for the next 10 years.

INTERNATIONAL PONZI SCHEME NEWS

Canada

Robert Castano was permanently banned from any involvement in securities transactions. Castano previously pleaded guilty to defrauding investors by promising monthly returns of 5% from trades on the stock market. The scheme brought in more than $2.5 million through his company, Skyline Communications, $1.5 million of which was lost.

England

Essex and London Properties Limited was shut down following findings that the company misused £18.9 million of investor funds. The scheme involved more than 800 investors who were promised 8% returns annually if the money was held for 3 years, or 12% if the money was held for one year. The company claimed to generate the returns from the purchase and resell of properties or from rental income. In reality, the company only purchased one property.

Japan

Eight men were arrested in connection with an alleged $73 million cryptocurrency Ponzi scheme. The scheme defrauded 6,000 people by promising them between 3% and 20% returns. The company, Sener Trader, claimed to be a U.S.-based investment firm. Sener Trader created a bogus Amazon ebook listing for its fictional CEO, “Spenser Brown” to try to hide the company’s Japanese origins. Six of the 8 men plead guilty and two have maintained their innocence. Sener Trader was formed after the demise of a prior scheme run by Eagle Gates Group.

India

Goodman Goqo, 33, pleaded not guilty to charges that he defrauded more than 4,000 people out of R76m. Goqo ran the scheme through his business, Ingede Mineral Holdings. He advised investors that he would invest their money on the stock exchange and offered them 30% monthly interest over six months with the principal guaranteed.

Sudipto Roy Choudhary, 44, was arrested in connection with the Rose Valley Ponzi scheme. The chairman of the scheme, Gautam Kunda, was arrested in 2015.

Braja Mohan Patnaik, 44, and his wife, Tridhara Mohanty, 40, were arrested on charges that they collected approximately Rs. 60 crore from over 1,550 investors in a number of schemes. They were directors of Datum Marketing Limited, which was used to lure in investors.

Gali Janardhan Reddy and Ali Khan were arrested in connection with an alleged $1 million Ponzi scheme that promised investors returns of 40% to 50% a month. Reddy is accused of taking Rs 20 crore from Syed Ahmed Fareed, the owner of Ambidant Marketing Pvt Ltd. to strike a deal with officials to drop the case they were investigating against Ambidant. Fareed and Ambidant are under investigation for defrauding hundreds of investors. Fareed is alleged to have run the scheme with his son, Syed Afaq. They are involved with the following other firms in India as well: Ambidant Constructions Ltd., Ambidant Marketing and Trading Company, Profit Theme, Ammar Enterprises, Ambidant Global Solutions, Ambisheltar, Perinet Technologies, Ambigold, Webworld, and Ambidant Marketing Financial Services LLC (Dubai).

Malay Banerjee and R P Dasora were arrested in connection with an alleged scheme involving Kim Infrastructure and Development Limited. The scheme allegedly defrauded 5,000 agents and investors who were promised that their money would be doubled or tripled.

Vinay Shah was arrested after being on the run for two weeks in connection with an alleged Ponzi scheme that defrauded investors out of Rs 260 crore. Shah’s wife, Bhargavi is still on run but Shah’s friend Chanda Thapa was also arrested.

Four people were charged in connection with the GainBitcoin cryptocurrency scheme. Vivek Bharadwaj, Pankaj Adlakha, Hemant Bhope and Amit Bharadwaj will face trial in December.Charges were filed against tviexpress.com and its promoters and associates, Tarun Trikha, Varun Trikha, Sikha Trikha, Shakti Sharad, and Anoop Kumar. They are accused of running a scheme involving share trading, commodities trading, holiday package booking, and air ticketing. Investors were promised that their money would double in a year, but the returns have not been paid.

Nigeria

Michael Eke, the founder of Micheno Micro Cooperative Society, was arrested in connection with an alleged N27 million Ponzi scheme.

Kayode Samuel and Kola Banji were arrested in connection with an alleged Ponzi scheme known as D9 Club. The scheme is believed to have defrauded at least 200 investors.

Kathy Bazoian Phelps

Ponzi-Proof Your Investments

An Investor's Guide to Avoiding Ponzi Schemes and Other Fraudulent Scams

Kathy has significant experience with the issues arising in Ponzi scheme cases, and in tracing and recovering assets in complex fraud cases. She has represented all types of parties in Ponzi scheme cases, including investors, defendants in litigation, trustees, and receivers. She has extensive litigation experience in a wide variety of bankruptcy litigation matters, representing operating and liquidating trustees, debtors, and secured and unsecured creditors. Kathy also serves as a mediator in bankruptcy matters, in other complex disputes, and in other matters requiring an expert on fraud or Ponzi schemes.

All blog entries posted on this site are published for general informational purposes and do not constitute legal advice, nor create an attorney-client relationship between the author and the reader. The blogs may not be updated to incorporate changes in the law or facts after the date of publication on the site, and therefore, any information contained therein should be checked to assure accuracy.

Comments made to blog entries posted on this site will be published if they relate to Ponzi schemes issues, advance the discussion of the issues in a productive fashion, and maintain a civil tone. Other comments and those not made with an acceptable standard of professionalism will not be published.